Why Estee Lauder (EL) Stock Is Falling Today

NEW YORK (TheStreet) -- Estee Lauder (EL) shares are down -0.7% to $74.50 after B. Riley downgraded the apparel company to "neutral" from "buy" and cut the company's price target down to $81 from $88.

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Separately, TheStreet Ratings team rates LAUDER (ESTEE) COS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate LAUDER (ESTEE) COS INC (EL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 11.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.44, which illustrates the ability to avoid short-term cash problems.
  • LAUDER (ESTEE) COS INC has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LAUDER (ESTEE) COS INC increased its bottom line by earning $2.58 versus $2.16 in the prior year. This year, the market expects an improvement in earnings ($3.05 versus $2.58).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Personal Products industry average, but is less than that of the S&P 500. The net income increased by 19.2% when compared to the same quarter one year prior, going from $178.80 million to $213.20 million.
  • Net operating cash flow has increased to $387.00 million or 38.65% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.43%.
  • You can view the full analysis from the report here: EL Ratings Report
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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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